Did Google hand China to Microsoft?

Microsoft RD Center China

It's rare that a public company takes moral stances where business interests suffer. But that's the choice Google made in January 2010, after reversing its search censorship policy in China. On Monday, ironically during the 235th celebration of America's freedom, Microsoft announced an English-language search deal with Baidu, China's leading search provider. Microsoft will censor the results Bing delivers.

I don't believe that the Baidu-Microsoft deal could have been possible, if not for the courageous actions taken by Google 18 months ago. Even then, Google should be faulted, having agreed to censor search results in China for nearly four years earlier. Google's decision to stop censorinp hurt its business in China, and not just search. Chinese manufacturer HTC is one of Android's biggest hardware OEMs. Perhaps it's no coincidence that Samsung has risen above HTC as premiere Android handset manufacturer over the last 18 months.

But the damage to Google's direct search business wasn't as severe as some pundits predicted in early 2010. Google's search share in China is about the same as it was then, 19 percent, according to China-based analyst firm Analysys International. Baidu's share is about the same, too -- 75 percent. The transactional value of China's online search market was $3.25 Billion Yuan in first quarter 2011. Another valuable metric: As recently as fourth quarter 2010, Baidu commanded 29.9 percent of China's online ad market. Google ranked third, with 7.8 percent share. All data points from Analysys.

Google was an early investor in Baidu and should have been a natural partner for providing English-language search. But Google won't censor results, refused to adhere to local rules governing search and now largely delivers queries from outside the Chinese mainland. Google's moral stance opened the door to a search provider less-picky about free speech and human rights. Enter Microsoft, which Bing could hugely benefit against Google.

What is Moral?

Monday's saga really begins in 2006, when Google, Microsoft and Yahoo acquiesced to Chinese government demands to censor search results. A huge moral debate followed, moving none of the search providers to change their stance. I was asked to offer moral analysis for a program that aired on the National Public Radio station in Washington, D.C. I don't recall which program, but I remember how I answered very pointed questions about the ethics -- the morality -- of  Chinese search censorship.

There is no moral high ground in business, I explained. The high ground is quagmire, because all public companies share a single, moral objective -- to make profits for stockholders. Any action that undermines that objective is immoral. From the measure of shareholder morality, the American search providers acted to protect and expand their search businesses in China.

But there's morality, and there's morality. Freedom of speech is one of the United States' founding principles, and we celebrated it July 4th on America's birthday, remembering when the final version of the Declaration of Independence was accepted as ready. This country has fought numerous wars to protect the freedoms of other peoples in other nations. American corporations have foregone business opportunities in countries like South Africa during Apartheid because of human rights issues. From that perspective, Google was right to take a stand against Chinese censorship. What does that make Microsoft, which in a statement said it would filter results "to ensure that we are in compliance with local laws".

Microsoft's decision to censor search for profit butts against a wave of protests sweeping parts of Africa and the Middle East -- citizens seeking freedom and rights Americans take for granted. Libya and Syria are on the brink, quite possibly following Egypt to dramatic rulership changes. But all's quiet in China, thanks in part to censored search. Hey, but that's OK, because Cisco and several other American companies are ready to build a video surveillance network -- as many as 500,000 cameras covering 400 square miles -- in the southwest city of Chongqing. What's ethical for one makes it right for all, at least by the measure of shareholder morality.

Yes, Google handed China to Microsoft -- at least with regards to search. Google's loss is Microsoft's greater loss. That's a pitiful position. What was Microsoft CEO Steve Ballmer thinking letting this deal go public on the day America celebrates its freedom?

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